3 minute read
What will the Real Estate Roller Coaster Ride look like in 2023?
by Craig Wales with Guaranteed Rate
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No doubt 2022 was truly a roller coaster year in housing. Just to look at one metric that we’ve been following all year, the average 30-year fixed mortgage rate in January of 2022 was 3.60% in December of 2022 that rate stood at 6.39%. That was just a few weeks after the average rate reached 7.20%, its highest level in 20 years.
While signs of a changing rate environment were evident all year, we had no way of knowing how much mortgage rates were going to rise in 12 months. It’s a much different housing market that we preview heading into 2023 than we had last year.
Where will rates go?
The greatest concern for most people who are interested in buying a home is what is going to happen to mortgage rates. Rates have gone up in relation to the Federal Reserve’s federal funds rate, which has risen from near zero at the beginning of 2022 to around 4.25% by the end of the year. The Fed is expected to keep increasing their rate to get inflation under control, but at a slower pace in the first part of 2023. That should affect mortgage rates, allowing them to continue dropping.
Expert predictions on rates
Many of the most respected industry watchers are predicting rates will continue to come down in 2023. The Mortgage Bankers Association (MBA) and the National Association of Realtors® (NAR) are both forecasting that mortgage rates will come down throughout the year, and finish 2023 in the mid-5% range. Fannie Mae and Freddie Mac take less optimistic views; seeing rates hovering in the high-6% range and finishing the year near 6.2%-6.5%.
Home prices: Up or down?
Tracking home prices can be a good news/bad news proposition. When home prices go up, that’s good news for homeowners and sellers, but bad news for homebuyers. When they go down, that could be seen as bad news for homeowners as their home’s value is also theoretically going down as well.
However, high home prices and high rates have priced many wouldbe homebuyers out of the market and that’s been bad news for sellers lately. A drop in home prices, along with a drop in mortgage rates, would be great news for everyone.
Home price forecast
Mortgage rates coming down, and home prices at a lower average than last year means housing greater affordability. Hopefully, in 2023, more people will be able to say, “Yes,” to buying a home.
Real estate experts are predicting good news for homebuyers. Their forecast is for the first year-over-year decline in the last decade, with the average home price at $368,000. While home prices aren’t dropping to pre-pandemic levels, by most of these forecasts they are likely staying near where they ended in 2022 as we move ahead in 2023.
Looking ahead at housing affordability
Mortgage rates coming down, and home prices at a lower average than last year means housing greater affordability. Hopefully, in 2023, more people will be able to say, “Yes,” to buying a home.
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